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tives and cars. Many of the 3,400 locomotives still undelivered were ordered by the eastern trunk lines now suffering so severely from congestion, for whose immediate relief 125 locomotives were drafted by the war board, not from lines that could spare them-because there are no lines in this condition to-day-but arbitrarily from lines outside the congested area. Our railroads, however, are determined to deal with their problems as best they can and get the largest use out of existing plant. We repeat what our executive committee has said publicly, that we believe the American railroads are getting as much service out of the existing plant as is possible by any form of management. There are, of course, more things we can yet do to increase efficiency and public service. These things we hope to do, with the assistance of our associates; we have not had a failure of cooperation by any railroad in the country. The support which we have had has been all that could be given under the most strict Government control. We have had the support of shippers and receivers of freight, of commercial bodies, manufacturers' associations, and State commissions. There have been differences of opinion, but when told that we had made up our minds, our constituents have gone along like good soldiers.

4. (a) By the impressment of steamships engaged in Atlantic coast traffic, of the Southern Pacific Co., Ocean Steamship Co., and Mallory and Clyde Lines, the railroads have been called upon to transport 962,000 tons of freight, in the last half of the calendar year, which heretofore has been transported by water.

(b) The New York, New Haven & Hartford, Boston & Albany, and Boston & Maine Railroads, serving New England, have actually transported 2,817,000 tons more anthracite and bituminous coal into New England this year than last, in response to the needs of that part of our country that heretofore have been supplied by ocean carriers. plying between New York, Philadelphia, Baltimore, and Hampton Roads and New England points.

(c) During the first year's operations of the Panama Canal (September, 1914, to August, 1915, inclusive) 2,060,000 tons of freight were handled between Atlantic and Pacific ports of the United States. The vessels handling this traffic were attracted by bids for ocean bottoms in the trans-Atlantic trade at substantially any rate the owner might demand, and with the exception of about 70,000 tons of coal carried by United States Government in its own vessels, the 1916 traffic of the canal was negligible, and continues so; therefore the transcontinental railroads were obliged to furnish facilities to handle substantially all of the 2,060,000 tons above referred to without taking into account the large but unknown increase of traffic following the entry of the United States into the war. To move the above tonnage is equivalent to the constant monthly use during 1917 of 46,200 freight cars and 619 locomotives, or to the entire present freight traffic on about 5,000 miles of line.

5. The railroads are finding it increasingly difficult to keep their equipment, and particularly their locomotives, in proper repair and efficient condition, on account of the shortage of skilled labor. The selective draft and the attractions offered by such rates of pay in munition and Government plants as most of the roads are financially unable to meet has resulted in a depletion of the shop forces of the carriers, some reporting a shortage in numbers of as much as 12 per

cent, and all reporting a much greater fall in efficiency due to the necessity of recruiting with unskilled men. The war board has publicly called attention to these matters and has also suggested to Ĝovernment agencies possible measures of relief, which so far have not been granted. It should not be forgotten that the increased movement of passengers, troops, mail, parcel post, and freight has been accomplished with forces greatly depleted as to number and weakened as to efficiency.

We quote outside views of the war board's work in unifying the operations and coordinating the facilities of American roads:

1. Secretary of War, Annual Report 1917, page 40, says:

A special committee of the American Railway Association was appointed to deal with questions of national defense, and the cooperation between this committee and the department has been most cordial and effective, and but for some such arrangement the great transportation problem would have been insoluble. I am happy, therefore, to join the Quartermaster General in pointing out the extraordinary service rendered by the transportation agencies of the country, and I concur also in his statement that " Of those who are now serving the Nation in this time of stress there are none who are doing so more wholeheartedly, unselfishly, and efficiently than the railroad officials who are engaged in this patriotic work."

Commenting on troop movements, the Secretary also says:

This strikingly illustrates the patriotic cooperation of American railroads with the Government and also the tremendous capacity of American railways. (New York Herald, Sept. 24, 1917.)

2. The Quartermaster General of the Army, Annual Report, 1917, pages 64 and 65, says:

The special committee on National Defense is a voluntary organization of the railways, serving purely through a spirit of patriotism. Its activities have been extended far beyond what was originally contemplated even for the military service. The railroads of the country are operated practically as one continental system, with the result that the congestion which would have been intolerable without such an organization has been in every case ameliorated and in many cases completely removed. The railroads' war board has been in practically continuous session at Washington since April 23. No more patriotic or self-sacrificing body of men is at this time serving the Government.

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It has extended to the distribution of power between the railroads, the adjustment of passenger-train service in accordance with national requirements, has furnished personnel and material for rehabilitation of the railways in France, has aided in every way possible in the great national endeavor which has now become the duty of every citizen of the country.

3. Report of Special Committee on Public Ownership and Operation as Contrasted with Private Ownership and Operation of Public Utilities, 1917, to the National Association of Railway Commissioners, pages 14, 15, and 17:

The fine sense of duty on the part of the leaders of the country's transportation systems that prompted this resolution deserves our respect and praise. We believe, moreover, that this resolution must also be considered as a most important document in American railroad history. The pledge of these men that they will operate their properties as a "continental railway system," that they are merging during the war "all their merely individual and competitive activities in the effort to produce a maximum of national transportation efficiency," opens a wide outlook. It must be remembered that it is the execu tive heads of the railroads who thus realize that the highest national transportation efficiency can be given only through the united operation of a continental railway system.

The express transportation system, the coal transportation problem, the food supply, the prompt movement of Government war supplies, the grain movement, the troop movement-all these matters were made the subject of special orders and recommendations by the committee, which, in all cases, were promptly obeyed by the carriers. The action of the railroads' war board is undoubtedly effective, and therefore desirable. It is also superior, in fact if not in law, to any orders of the State or Interstate Commissions. There is no reason to believe that the new system, once its need and efficiency are established, will be abolished, and if it is an improvement over existing instrumentalities it should not be abolished.

4. The Interstate Commerce Commission, in its annual report December 1, 1917, pages 64 and 65, says, after referring to the organization of the railroads' war board:

Without attempting to detail the activities on the part of the railways through this organization it will suffice here to say that they have responded to and supported the executive committee, which in an earnest way has attempted to deal with the vexatious and troublesome questions and to meet the unprecedented demands upon the railways.

EXHIBIT 4.

LEGISLATION SUGGESTED.

This committee, being charged with the responsibility of increasing the transportation facilities of the railroads in the present emergency, has dealt only with immediate needs. We have not, therefore, undertaken to bring to your attention various considerations for the development of the railroads which have been from time to time during recent months urged upon Senator Newlands's joint committee which has been investigating the whole railroad problem.

This committee had the honor recently to submit to Senator Newlands some suggestions of the immediate help which the Government could give to the railroads. These suggestions were as follows:

The immediate appointment of a traffic officer to represent all important Government departments in transportation matters with whom the railroads can deal, to secure active Government cooperation, the prompt and orderly transportation of the Government traffic, and avoid the excessive use of preference orders, which congest traffic instead of facilitating it.

Most of the railroads need more locomotives immediately and enough new cars to replace those worn out. There are approximately 3,800 locomotives and 33.000 cars still on order undelivered for American railroads. The railroads expect to provide the capital. Priority orders are essential for prompt delivery of such equipment.

Approximately 2.000 locomotives and 150,000 cars, in addition to those now on order, are necessary for early construction to meet the requirements of next year. This is no more than the railroads usually require every year, and at present prices represent a cost of approximately $500,000,000. While a number of the railroads are able to purchase their quotas of such equipment without aid, it is apparent that because the United States has necessarily occupied the investment market for war loans, as evidenced by the recent request of the Secretary of the Treasury that no new private financing shall be undertaken without conferences with him, the railroads generally can not next year provide through their usual channels for the capital requirements for the acquisition of equipment and other possible additions to plant. They invoke, therefore, the cooperation and aid of the Government, through the Treasury Department and the Federal Reserve Board, to secure for them, on their own individual credit, the new capital found by the Government to be necessary not only for enlargement of plant but for renewing maturing obligations.

Immediate increase in rates as defined by the Interstate Commerce Commission special report to meet increasing operating expenses and strengthen railroad credit are necessary in eastern territory, and may become necessary in other territories.

Railroad men drafted to be enrolled and assigned to railroad service until actually needed for military service.

To the extent that legislation, if any, is needed to give effect to these requirements, such legislation is now suggested.

SPECIAL REPORT OF THE INTERSTATE COMMERCE COMMISSION.

WASHINGTON, D. C., December 1, 1917.

To the Senate and House of Representatives:

The act to regulate commerce requires the commission to transmit to the Congress such recommendations as to additional legislation relating to regulation of commerce as the commission may deem necessary. Under this mandate the commission submits the following special report, supplementing its annual report, with reference to transportation conditions as affecting and affected by the war in which the United States is now engaged:

The railroads of the country came into being under the stimulus of competition. From the outset their operation and development have been responsive to a competition which has grown with the growth of population and industry. This competitive influence has been jealously guarded and fostered by State laws and constitutions as well as by the Federal law. The keenness of rivalry naturally drew to the front those who were quick to seize and resolute to retain every available point of vantage for their respective roads. Terminals, if confined to exclusive use, were not only of strategic importance but profit-yielding assets. Out of competition grew rate wars, pooling, mergers, and consolidation into systems, as well as the rebating and other preferential treatment of shippers which the act to regulate commerce was primarily framed to prevent.

In that act the Congress, accepting the competitive principle as salutary, has thrown about it prohibitions against compacts for the pooling of freights or divisions of earnings of different and competing railroads, and, while the original act is but the nucleus of the act we now administer, that prohibition has remained unchanged.

But original act and successive amendments were alike framed in times of peace and for times of peace. They looked to protection of the shipper and the public against unjust or unfair treatment by the carrier, and not to protection of the Nation and its commerce in time of war by utilization of all the forces and resources of its transportation systems to their fullest extent.

Since the outbreak of the war in Europe, and especially since this country was drawn into that war, it has become increasingly clear that unification in the operation of our railroads during the period of conflict is indispensable to their fullest utilization for the national defense and welfare. They must be drawn, like the individual, from the pursuits of peace and mobilized to win the war. This unification can be effected in one of two ways, and we see but two.

The first is operation as a unit by the carriers themselves. In the effort along this line initiated early in this year they are restricted

by State and Federal law, and the idea is the antithesis of that which heretofore has controlled their activities. Their past operations have been competitive, although since the Hepburn Act, and especially since the Mann-Elkins Act, the prescription by this commission of reasonable maximum rates and charges for rail carriers. subject to the act and the exercise of its power to require abatement of unjust discrimination or undue prejudice have in great degree restricted that competition to the field of service. But whether or not perpetuation of the competitive influence is desirable under a system of Government regulation, it is apparent that operation of our railroads as a unit involves the surrender by each of exclusive use of terminal facilities, surrender at times of profitable traffic to other carriers, and acceptance of less profitable traffic, with resultant loss of revenue, wherever economy of movement or greater freedom from congestion would dictate that course if the various carriers were, in fact, but one.

The alternative is operation as a unit by the President during the period of the war as a war measure under the war powers vested in him by the Constitution and those which have been or may be conferred by the Congress.

As bearing upon the alternatives thus stated, it will be recalled that since the beginning of the war in 1914 the traffic offered to and moved by the railroads has increased enormously. Prior thereto there had been occasional periods of car shortage, usually restricted in territory, but it may be said that from 1907 down to 1916 the number of cars in the country exceeded the demand. This subject is treated in our annual report.

The sudden, unforeseen, and unprecedented demand for transportation occasioned by the war placed a strain upon the facilities and equipment of the railroads which they were not and are not. prepared to meet. There was created a need for immediate and extensive additions to existing facilities and equipment. This need is coincident with demands upon capital, as well as upon labor, manufactures, and natural resources, such as we have never known. Important additions and betterments will require new capital.

The railroads propose essentially that we allow increases in freight rates of such magnitude that their increased earnings will attract investors, by dividends declared or by the prospect of dividends, in competition with securities issued by Federal, State, and municipal Governments, public utility corporations, and industries organized and operating primarily for gain as distinguished from public service. Some of the latter have yielded large profits since the outbreak of the war.

An attempt to secure new capital would come at a time when the rising cost of living has made it diffcult for those dependent for support upon their earnings to meet their current expenses; after the absorption by American capital of two-thirds of the American securities owned abroad prior to August 1, 1914, the railroad securities returned to this country alone amounting to from $1,700,000,000 to $2,000,000,000; after financing in this country of loans to our present allies; and after subscription for almost $6,000,000,000 of Liberty loan bonds.

Even if the railroads have more money, the immediate construction of necessary facilities and equipment could not readily be effected.

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